• The federal government is expected to backdate its stage two tax cuts to July 2020 at a cost of $12 billion.
• The cuts will hand a maximum of around $2,500 back to taxpayers making $120,000 or more per year.
• Most Australians however will receive around $1,080 from the cuts.
• Visit Business Insider Australia’s homepage for more stories.

The Australian government looks set to backdate stage two tax cuts handing some Australians thousands of dollars back on their next return.

The changes would mean that Australians are taxed at a flat 19% on income between $18,200 and $45,000, and 32.5% on every dollar after that up to $120,000.

The cuts, expected to be backtracked to July 1, 2020, differ from the stage-one cuts last year and will return more money to Australians the higher up the income ladder they sit.

The median Australian, for example, makes around $48,000 a year. They would pay a little over $6,060 a year in tax under the changes, or around $1,080 less than they do now. It’s not a bad bit of change.

For someone on a $90,000 income, it’s about the same amount back, reducing a $20,800 tax bill to $19,715 or thereabouts.

But it’s for someone earning $120,000, or more, that the dollar amount more than doubles. They will pay less than $30,000 in tax after the cut, or almost $2,500 less than they do now.

While the tax cut represents a smaller percentage of their income, it also has less likelihood of stimulating the economy. Progressive think tank the Australia Institute argues that like the controversial stage three tax cuts, the benefit is disproportionately received by those who will save, rather than spend it.

“Stages 2 and 3 or the government’s tax cut plan are designed to mainly benefit those on high incomes. Those on low incomes get little to none of the tax cut. Bringing these stages forward to 2021-22 will simply mean high-income taxpayers get a large tax cut earlier. This is ineffective stimulus,” economist Matt Grundoff wrote in a September analysis.

Instead, Grundoff argues that a permanent increase to JobSeeker, which would then be immediately spent by its recipients, would be far more effective at boosting the economy.

However, despite the criticism, it looks like the cuts, which will cost $12 billion, will pass unopposed. While Labor had stood against them initially, the Federal Opposition has indicated it will support fast-tracking them to support a struggling economy.

The Morrison government will unveil other stimulus measures at 7:30 p.m. tonight when it hands down its Federal Budget.

An increase to JobSeeker is not expected to be one of them.

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